The housing market continues to show that it’s in recovery. The latest news comes from the Federal Housing Finance Agency (FHFA), which said home values rose another 0.6% between October and November, on average.
Since one year ago, home values are higher by 5.6 percent nationwide.
Home Price Index : A 10-Month Winning Streak
Each month, the Federal Home Finance Agency publishes its Home Price Index (HPI), a home-valuation tracker which operates on a state-wide, regional, and national level.
The Home Price Index tracks changes in home prices between subsequent sales, using data supplied to Fannie Mae and Freddie Mac as part of the mortgage approval process.
The index is benchmarked to the value of 100, which represents the housing market as it existed in 1991.
Today, the HPI is 192.2 and it has climbed for 10 straight months.
Like all home-valuation trackers, however, the Home Price Index remains flawed.
The first big flaw is that the HPI sample set is skewed. Although Fannie Mae and Freddie Mac mortgages are the most common among U.S. home buyers, the Home Price Index specifically ignores a home’s price change when an FHA mortgage is used for financing; or when a VA loan is used.
Similarly, USDA and jumbo loans are excluded from the measurement.
As FHA market share has grown — specifically among first-time home buyers — these exclusions are of greater consequence.
Another flaw is that the FHFA Home Price Index counts home resales only, which means that new home sales are ignored. New home sales account for 1 in 10 home sales nationwide.
Lastly, the Home Price Index is published on a 60-day delay.
It’s nearly February yet we’re discussing the housing market as it existed in November. A lot can change in 4 months and “stale data” is of little use to buyers and sellers in rapidly changing markets such as Marin County, California; Detroit, Michigan; and Phoenix, Arizona.
Arizona, Colorado Lead Mountain Region Gains
The FHFA’s Purchase-Only Home Price Index rose 0.6 percent between October and November, and has climbed 5.6% in a year. Prices appear to have bottomed in October 2011, and have since returned to June 2010 levels.
However, like all things in real estate, the Home Price Index is local. Home value changes have varied on a regional level, with some areas posting huge annual gains for the twelve months ending November 2012 and others posting small ones.
The Mountain Region, for example, which includes Arizona and Colorado, showed large gains since last year. The Middle Atlantic Region did not.
Here is a sampling of the annual HPI data from the FHFA’s 9 U.S. regions :
- Pacific : +11.1% (Hawaii, Alaska, Washington, Oregon, California)
- Mountain : +14.8% (Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona)
- Middle Atlantic : +0.5% (New York, New Jersey, Pennsylvania)
- East North Central : +2.3% (Michigan, Wisconsin, Illinois, Indiana, Ohio)
- South Atlantic : 7.0% (Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida)
In addition, the West South Central Region gained +5.4% over the past year. The region houses Oklahoma, Arkansas, Texas, Louisiana.
Nationwide, home values remain roughly 15% below the April 2007 peak.